BOE Hikes Again

GBPUSD is lower today following the November BOE meeting yesterday, though this is more a function of the current strength we’re seeing in USD on the back of yesterday’s stock market wipeout. Indeed, the BOE meeting as firmly hawkish with the bank hiking rates to 4% for the first time in over three years and signalling the likely need for further tightening. While BOE governor Bailey was keen to state that a decision has not been made on a follow-up hike, Bailey noted that such a move was more likely than not given the bank’s inflation expectations.

Higher UK Inflation

Indeed, Bailey noted that even in light of the recent fall in crude prices, there is still plenty of inflation expected to come in the UK. Along with the hike yesterday, the BOE revised higher its inflation forecasts with CPI now forecast to hit 5% next year, rising to 4.5% in Q1, up from the previously forecast 4% level. GDP forecasts were also revised higher with 2026 growth now expected to hit 2%, up from 1.1% previously.

Bullish GBP View

In light of Bailey’s comments and the updated economic projections from the bank, traders are betting on another hike by February. Going forward, USD strength might continue to override GPP upside but long plays against the likes of EUR and JPY certainly look attractive now.

Technical Views

GBPUSD

The rally has stalled for now into the 1.3478 level with price now reversing back within the centre of the large contracting triangle pattern which has framed the consolidation over the year so far. 1.33 remains the key support level to watch, with any break of that level to turn focus to the triangle lows and 1.3181 subsequently.